National Economic Development & Labour Council 2010/11 Annual Report

NCOP Public Enterprises and Communication

05 June 2012
Chairperson: Ms M Themba (Mpumalanga, ANC)
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Meeting Summary

The National Economic Development and Labour Council (NEDLAC), presented its Annual Report for 2010/11 to the Committee. The history and core mandate of NEDLAC was outlined, and the presenter noted that much of the criticism levied against NEDLAC failed to take account of its unique role and stemmed from lack of understanding around its roles and activities. NEDLAC was truly representative of business, government, labour and the community. The Protocol Document set out its founding principle to attempt to function on the basis of consensus, although it was conceded that there were challenges, and this was also hindered by politicisation of various issues. It was noted that NEDLAC was divided into four Chambers, dealing with the Labour Market Policy Stream, Trade and Industry Policy Work Stream, Development Policy Work Stream, and the Public Finance and Monetary Policy Work Stream. The key achievements and activities of each was outlined. Many of the activities were ongoing, particularly in relation to public finance. The Decent Work Country Programme was highlighted as a joint effort with the International Labour Organisation that would continue to 2014. It was also highlighted that the Integrated Youth Development Strategy (IYDS) had been completed but was still awaiting further consideration by the management of NEDLAC, because government was still reviewing its position on the matter. Organised labour had also suggested some amendments. National Health Insurance would be elevated to cross-chamber task team, and there would be further engagement during the White Paper processes. It was also highlighted that transversal committees dealt with matters not falling squarely within the mandate of one of the chambers. During the year, a report had been commissioned on NEDLAC and its operations, and NEDLAC was already implementing some of the recommendations from that report. Another investigation was ongoing, and the results would be reported to the Minister, and then to this Committee, in due course. It was indicated that NEDLAC had been involved in three applications in relation to water quality, electricity tariffs and crime issues; the first two were still ongoing, with discussions on the issues, and in the third the applicant, Solidarity, had been asked to provide further details.

The financial statements indicated a deficit, as with the previous periods, and it was explained that this came about as a result of NEDLAC’s involvement in several unbudgeted matters. NEDLAC had traditionally been under-resourced although this had been to some extent corrected. It had received an unqualified audit, with emphases of matters in relation to the recording of asset procurement, and leave provisions that were accounted for in the wrong period. Two other matters had been raised by the Auditor-General in a Management Letter, one relating to the spending by the labour constituency, which was settled when invoices were produced, and the other to the functioning of the internal audit committee, which had been corrected by revisions to that committee’s Charter, in particular now allowing it to appoint an independent external chairperson. Matters around the segregation of financial duties had also been corrected, and NEDLAC was reconsidering its financial control systems. The challenges were highlighted as including global economic effects, increased competition and pressure on firms, the way in which social partners engaged, and their capacity to do so, and the limited number of experienced negotiators who were placed under enormous pressure. NEDLAC would be focusing on promoting health dialogue, would be addressing turnaround times, and realignment for better communication, as well as development of staff and systems.

Members asked about the vacancies, the resignation of the Chief Financial Officer and other staff issues, as well as the problems with the audit committee and how the audit issues were being addressed. They enquired about the role of NEDLAC in relation to departments and specific processes, and its role particularly in relation to pro-poor initiatives, job creation and prevention of job losses.
The Committee raised concerns on the structural composition of NEDLAC, and whether it was still relevant and served the purposes intended when it was created. NEDLAC said that whilst this question was relevant, it was unfortunate, and believed that the willingness of all South Africans to engage in dialogue proved that it was indeed relevant, although it also conceded that there had been some difficulties with adversarial engagements rather than the spirit of consensus. Members were concerned about the matters of emphasis, the length of time being taken to finalise policy matters, and skills and capacity to negotiate at bargaining chambers in particular.  

Meeting report

National Economic Development and Labour Council (NEDLAC) 2010/11 Annual Report
Mr Alistair Smith, Executive Director, National Economic Development and Labour Council, commenced his presentation by giving a brief background and history of the Council (NEDLAC). He noted that many of the negative media reports about NEDLAC stemmed from a lack of public understanding about the activities and the role that NEDLAC played as an institution. The NEDLAC Act had been one of the first pieces of legislation in the democratic dispensation, and NEDLAC should be seen as the entity that truly belonged to and represented everyone, as it represented business, government, labour and the community. The founding principle at NEDLAC was that it should function on the basis of consensus, although he conceded that this was also a major challenge. The question was how NEDLAC should create and follow a culture of engagement, trying to find solutions, rather than an adversarial approach.

Mr Smith noted that NEDLAC had four key chambers, namely: Labour Market Policy Stream; Trade and Industry Policy Work Stream; Development Policy Work Stream; and the Public Finance and Monetary Policy Work Stream. He outlined the key achievements and activities of each.

In the Labour Market Policy Work Stream he pointed to a number of activities that were flagged in the 2010 Annual Report and noted that most had now been finalised, except for those in the latter part of the 2010/11 financial year, which had now been taken up by the Labour Market Review Committee. The Decent Work Country Programme was one that would continue until 2014, and he reminded Members that this was a joint programme between the International Labour Organisation (ILO) and NEDLAC.

The Trade and Industry Policy Work Stream was the best-established chamber, with a fairly good system of engagement. Issues like the Cooperative Amendment Bill have been finalised by the Chamber, and the Customs Control and Customs Duty Bills were close to finalisation, Preferential Procurement Regulations were finalised. The Strategic Sessions with the Minister of Trade and Industry, which were unique to this Chamber, meant that the Minister would sit once or twice a year with the Chamber’s representative. This Chamber had also attended to the finalisation of the Climate Change Green Paper, and a study on the Administered Prices that also had been finalised. The Standards Quality Accreditation Metrology (SQAM) was an ongoing programme of this Chamber, and the Legal Metrology Policy had been finalised. The Small Scale Fisheries Policy had recently been finalised. A study on Water Quality Risks was commissioned and been finalised. There was ongoing engagement on the Industrial Policy Action Plan (IPAP II). NEDLAC was awaiting clarity from the Department of Economic Development on how to proceed with the ITA legislation.

Sub-committees of this Chamber were FRIDGE and TESELICO, the first being a programme of research where a series of projects had been finalised during this period.

The Development Policy Work Stream had completed discussions on public transport. The Integrated Youth Development Strategy (IYDS) had been completed but was still awaiting further consideration by the management of NEDLAC, because government, after some problems had been identified, was still reviewing its position on the matter. Organised labour had also suggested some amendments. The  Rental Housing Bill had been finalised, and in respect of Higher Education and Training legislation, a series of amendments were tabled, were not finalised in this year, but had since then been finalised.

The activities in the Public Finance and Monetary Policy Work Stream were, for the most part, still ongoing. There had been discussions on tax policy, and the national budget process overlapped with the twice-yearly briefing from the Minister of Finance to NEDLAC. The Financial Sector Charter Council was ongoing, with updates on the activities of the Council. The National Health Insurance had recently been on the agenda, with a briefing having been given by the Department of Health. National Health Insurance (NHI) would be elevated to a cross-Chamber task team, but the White Paper consultative processes would bring further engagement.

Management Committee Task teams, or Transversal Committees were called when an issue did not fall squarely within the agenda of any one Chamber.

During this year, a report was commissioned to investigate NEDLAC and its operations, and a number of recommendations were developed on how to improve operations. NEDLAC was now in the process of implementing some of the recommendations in that report. He noted that the Energy and Electricity Task team, which was formed in the wake of the 2008 energy crisis, was still involved in ongoing engagement, and the Integrated Resource Plan (IRP) for electricity had been finalised. An implementation plan and Medium Term Risk Mitigation programme were being prepared.

The New Growth Path (NGP) in NEDLAC had been a fairly unique process, driven by the Minister of Economic Development, and an NGP leadership process involved all social partners. This process had yielded a Four Key Accord, but there was ongoing discussion within the management of NEDLAC as to how the NEDLAC and NGP leadership processes would be integrated. The National Project to Reduce Poverty and Inequality was outlined as an essential programme, but there had not been significant progress by the Task Team in addressing this programme.

Mr Smith reported on the three section 77 applications that the Council received during the period under review. The first one was in relation to Water Quality. NEDLAC had recently had an engagement with the Department of Water Affairs and other social partners, where agreement was reached to set up two working groups to work on the issue of access, as well as the problems around acid mine drainage. The Department of Water Affairs had given an update and there was then another agreement to set up a third working group, to deal with infrastructure.

The application in relation to Electricity Tariffs was still outstanding, showing little progress, although it was hoped that discussions in the Energy Electricity Task Team could make some progress in trying to resolve this application.

In relation to the application by Solidarity, on crime issues, Mr Smith reported that a letter had been sent to the applicant asking that a formal application be sent through, failing which the matter would be removed from the Council’s agenda. Solidarity had asked for the application to be flagged.

Mr Smith then highlighted the financial statements and noted, at the outset, that there was a deficit for the 2010/11 financial period, as well as the previous periods, due to a number of activities in which NEDLAC had to become involved, and which had not been planned or budgeted in advance. It had been accepted, for some time, that NEDLAC was under-resourced, although this had to some extent been remedied. NEDLAC had received an unqualified audit, but there were two Emphases of Matter. One related to assets procurement, specifically the acquisition of NEDLAC property. Mr Smith explained that in the previous years, NEDLAC had not accounted for this in terms of the Generally Recognised Accounting Principles (GRAP 23) and that had to be remedied, with the R10 million having to be accounted for in another manner. The other Emphasis of Matter related to leave provisions, which were accounted for in the wrong period.

The Auditor-General (AG) had, in his Management Letter, also questioned two specific transactions. The first related to a quotation dealing with a transaction of the labour constituency, falling under the constituency allocation, which was a new development in NEDLAC. The constituency allocation was meant for business, labour and community, to deal with their activities and capacity building. This transaction involved a particular conference that the labour sector held. Invoices were subsequently produced and presented to the auditors, and this matter was resolved. NEDLAC had decided to improve and review the question of procurement policy, processes and controls, and that was currently under way. The second question related to the functioning of the internal audit committee, and in particular the frequency of that committee’s meetings. The committee had acknowledged the matter, and the Management Committee had approved the correction of the Audit Committee Charter, because it was out of date. The convenors were also busy working on a revised policy document, in which the scope of the audit committee had been expanded, to ensure that there was an external independent chairperson.

The AG had also highlighted some issues around the segregation of duties, and particularly the scope of the Financial Manager.  When the AG commented that there was insufficient segregation of duties, NEDLAC had taken steps to address the matter. It had remedied the situation by moving from a cheque system to an electronic payment system, with better segregation between processing, loading and authorisation. There was now a split between finance and payroll functions, and a new Human Resources Coordinator would be appointed from 1 July.

Mr Smith also mentioned that in November 2011 the Chief Financial Officer had resigned. NEDLAC now intended to look in more detail at the control systems. A further report was expected, and once the investigations and report were completed, the Minister would be briefed.

Mr Smith then highlighted the challenges that NEDLAC faced, in relation to the external environment. Global economic effects posed a threat and risks to South Africa’s employment rates and economy. This in turn translated into challenges for the social partners, and indeed the legislative process. Internally, challenges included the capacity of social partners, which affected how they engaged with each other. There had been concerns that in the past there was more conflict-driven engagement than attempts to find real solutions. Poor coordination and a lack of coherence presented other challenges, especially given the complex policy initiatives and legislative programmes. The social partners were placed under pressure to respond to and engage on new or amending legislation within a very short period of time, and this compelled NEDLAC to depend on a small number of experienced negotiators, who were active not only in NEDLAC, but also in other areas. This meant that they were expected to engage on a number of issues, on virtually a full-time basis, yet were not paid. The impact of the lack of coherence was affecting everyone in NEDLAC.

Mr Smith then set out that in January each year, NEDLAC’s management committee held a strategic planning workshop where reviews were conducted. This reached the conclusion that NEDLAC ha to pay greater attention to the leadership and governance of the entity, and there was a greater need to enhance the strategic leadership debate. Another priority of NEDLAC was effective delivery on the core mandate, and this related to how legislative amendments and new policy were addressed. The key question was how to ensure optimisation of the turnaround time on engagements. The NEDLAC internal systems and processes were focused on the Protocol Document, which set out the rules of engagement and time frames, and this would be updated. NEDLAC saw the promotion of healthy dialogue as a priority, and this was based on realigning the entity and capacitating it in a way that resulted in better communication. Finally, NEDLAC also prioritised development of staff, upgrading of systems and processes for higher performance. These were noted in this year’s business and performance plan and would be rolled over into the next year’s plan.

Discussion
Mr H Groenewald (North West, DA), asked how many vacancies NEDLAC had. He also enquired if NEDLAC was making use of consultants, or whether it had enough skilled negotiators.

Mr Smith indicated that NEDLAC had a staff of 24, and this was to be extended to 27. A Programmes Director was to be appointed from 1 July, and this person would essentially be an Operations manager, to drive the Chambers’ work, something that had not been attended to fully to date. The  communications and the research vacancies would also be filled.

Mr Groenewald asked how NEDLAC was involved with the NGP, the National Development Programme (NDP) and the youth wage subsidy, and what exactly its role was in all of these matters.

Mr Smith answered that there were ongoing links in relation to the NGP and NDP processes. There had been some challenges on the accords. There had been consideration, and now agreement, of the possibility of establishing a jobs accord or a social accord that would look at prices, wages and inflation. However, it was recognised that this kind of conversation was perhaps still premature, since the current priorities lay with infrastructure. He agreed that the youth wage subsidy had been with NEDLAC for some time. In January, there was some movement. Government had been proposing a comprehensive strategy to confront youth unemployment, but the matter had become politicised. Nonetheless, at the last management committee meeting, there was agreement reached to escalate this matter to the leadership level, so that all social partners would address this together.

Mr Groenewald noted that water legislation was pending, but also wanted to know what role NEDLAC played in relation to the fracking in the Karoo, what role it played in the taxi recapitalisation programme in relation to the Department of Transport, and what its role was in relation to rental housing, noting that in a meeting with the Department of Public Works it was indicated that this Department probably would not meet its deadlines.

Mr Smith said that NEDLAC’s cooperation with departments did pose some important issues and challenges. This brought back the questions of how all social partners were aligned to needs, and whether they adhered and were accountable in terms of the initial Protocol Document. The Protocol set out guidelines on how issues must be tabled. For example, it set out the role of NEDLAC on the Green Paper processes, which were essentially working documents. In relation to administrative support, he said that there was good support from government and Ministers. However, some senior officials wanted to by-pass the institution, possibly because of the constraints and pressure under which they were working.  

Mr Groenewald wondered if NEDLAC had any power to help society, particularly the poor in rural areas, in relation to labour, job creation and prevention of job losses.

Mr Z Mlenzana (Eastern Cape, COPE), commented on the statements about the role and the ideal mandate of NEDLAC as a politically crafted entity for the post-1994 era, and asked for an honest answer as to whether NEDLAC was still a purpose oriented entity, or whether there was now an element of a big-brother / small brother approach in the negotiations. He commented that NEDLAC, in the years after 1994, was given the responsibility to skill negotiators before engaging on any issues, and so capacity building had always been a priority for this organisation. He wanted to know whether NEDLAC still regarded itself as a truly tripartite institution with dialogue on an equal basis. In relation to collective bargaining processes, he wondered how NEDLAC had failed to reach agreements. He said that all of these questions were based on the concerns as to whether NEDLAC was still relevant, given the current agendas and developments, and whether there were likely to be perpetual rifts between labour and business, or labour and government.

Mr M Sibande (Mpumalanga, ANC) also wanted to know if NEDLAC thought it was still on the right track, pointing to the purpose behind its establishment.

Mr Smith  thought that the questions on whether NEDLAC was still relevant and had a role to play were legitimate, even though they were rather unfortunate. The desire of most South Africans was to engage in dialogue and find constructive ways to move forward. The question was then rather to be phrased as to what NEDLAC, as an entity, did to strengthen and promote constructive dialogue. In answering the question as to whether NEDLAC had sufficient power in the negotiation processes around pro-poor matters,  he said that it was concerned that anti-poverty programmes and initiatives had unfortunately been sidelined, or were taking too long to bring to the fore, in relation to other programmes, and that was not acceptable. A complete review of what had been achieved by NEDLAC in relation to legislative matters would be done.

Mr Sibande asked for more clarity on the resignation of the Chief Financial Officer, asking if this was in any way linked to the Auditor-General’s findings, or whether this person was persuaded to resign.

Mr Smith said that there had been “robust engagement” with the Chief Financial Officer, who had decided, during this process, to resign. At the moment there were ongoing investigations, and the Minister would be informed of the outcome, and would in due course then report to the Committee.

Mr Sibande furthermore called for more comment on the findings of the Auditor-General in relation to non-compliance by the leadership, specifically the non-compliance with sections 55 (1)(a) and (b) of the Public Finance Management Act (PFMA).

Mr Sibande asked who constituted the internal audit committee.

Mr Smith explained that the audit committee was composed of a representative from each of the government, labour, business and community constituencies. The Executive Director and the Chief Financial Officer also sat, ex officio, on that committee. To date, the main challenge had been the absence of an external independent chairperson. However, this challenge had now been addressed as the new external independent chairperson would be allowed in terms of the changed policies. He mentioned that there would be a regular review of the Charter.

Mr M Jacobs (Free State, ANC) asked why NEDLAC was not achieving more consensual engagements as an alternative to adversarial engagements, and cited the example of the debate around labour brokers, where NEDLAC had asked that Parliament intervene and decide on the position, whereas it was surely up to NEDLAC to produce a consensual position on the issues.

Mr Smith responded that adversarial engagements had been one result of the legacy inherited from the industrial relations framework and collective bargaining. This was also influenced by the local economic difficulties that the country was facing, and the increase in unemployment, as competitors placed greater pressure on firms, promoting the likelihood for conflict and contestation. The main challenge faced by the social partners was how NEDLAC could rise above those difficulties and find solutions. However, having said that, he also stressed that positive examples could be found, such as the finalisation of the fisheries policy. He added that whatever happened in the broader political environment had a spill-over effect on NEDLAC.

Mr Jacobs called for more detail on the section 77 notices. He was particularly concerned about the water quality issues and said that much of the unrest in communities had to do with concerns around water quality, and access to decent water.

Mr Smith said that the Water Amendment Bill had come up on the agenda, as a result of the application, and the Department of Water Affairs had given a progress report on acid mine drainage and access to water. The risk of increases in the cost of water for consumers and industries was addressed,  and it was agreed that this should be resuscitated and dealt with at committee level within the next month.

Mr Jacobs also wondered why there was little progress on the national project to reduce poverty and inequality.

The Chairperson asked who served on the Board of NEDLAC, and who the organisations were that constituted NEDLAC. She also asked how NEDLAC ensured that its constituent organisations were still operational and therefore were fully representative of the constituencies that they purported to represent.

Mr Smith indicated that Board was composed of various convenors. There was a convenor from government, from labour, business and from the community, and each of the chambers was also represented by convenors. In general, the management of the entity worked well, unless there were hotly contested subjects. There was an agreement in the Secretariat that there should be a review of membership, in particular to look at whether there were other interests or voices that needed to be brought on board to deepen the original aspirations of the founding Act.  

The Chairperson asked for an update on the Proudly South Africa (PSA) campaign and asked when the outdated protocols were likely to be amended.

Ms Ronel Maartens, Financial Manager, NEDLAC, explained that R832 000 of the R963 000 that was payable in rent from the PSA campaign was written off , and in relation to the R135 000 owed in the 2011 year, R43 000 was still unpaid.  

The Chairperson commented that legislation being referred to NEDLAC seemed to take far too long to reach finalisation.

Mr Smith noted that delays in finalising legislative matters could be occasioned by the nature of the subjects on the agenda. He said that, for instance, there were particularly complex matters in the Labour Market Chamber and issues around collective bargaining, and added that politicisation of some of the issues in that Chamber were hindering finalisation.

Mr Mlenzana questioned the composition of the NEDLAC delegation to Parliament, asking whether they were all eligible to take part in the meeting.

Mr Smith introduced the delegation, and indicated that those social partners who were not in attendance were attending an International Labour Organisation (ILO) Conference in Geneva. He apologised for omitting to record their apologies earlier.

The Chairperson asked the delegation present to ensure that they would report back to the social partners who were unable to be present, and suggested that the next meeting should take place in a location that was central to all social partners.

Members adopted the Report on the Annual Report presentation of NEDLAC.

The meeting was adjourned
.

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